Assume that the central bank sells government securities in the open market. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the current international transactions balance and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium.
a. The current
international transactions balance becomes more positive (or less negative) and monetary base rises.
b. The current international transactions balance becomes more negative (or less positive) and monetary base falls.
c. The current international transactions balance and monetary base more negative (or less positive).
d. The current international transactions balance and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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The CPI is biased because it
A) takes into account the changes in product quality. B) takes into account the changes in technology. C) does not always take into account the changes in product quality. D) accurately measures the cost of living but not the cost of producing. E) does not include services.
What actions would a supply-side economist advocate to cure an inflationary situation?
What will be an ideal response?
When the economy enters a recession, automatic stabilizers create:
A. higher taxes. B. more discretionary spending. C. budget deficits. D. budget surpluses.
The primary feature of money is that it serves as
A. barter value. B. a medium of exchange. C. intrinsic value. D. commodity value.